Michele Boldrin and David K. Levine argue companies use patents to block competitors in their paper, The Case Against Patents.

We talk a lot about what might be done to fix the problems of software patents, but not much about abolishing them. Abolition seems well-nigh impossible, given current economic and political realities. Serious economists and respected financial institutions don’t usually discuss it publicly. Thus, I was surprised when I finally got around to reading a recent working paper published last month under the auspices of the Federal Reserve Bank of St. Louis that argued broadly for patent abolition position.

The paper by two distinguished professors of economics, Michele Boldrin and David K. Levine, is titled The Case Against Patents. Boldrin and Levine review some of the lamentable realities of the U.S. patent system, including the dramatic increases in issuance of patents that block future innovation, and in the quantity and cost of patent litigation. They also point out that patents are often detrimental to consumer welfare, as once-but-no-longer innovative companies use patents to block competitors.

As Boldrin and Levine explain, patents are not really property rights, but rather monopoly rights. The grantees of a government monopoly have strong incentives to seek additional rents to expand their monopoly.

[A] system that at one time served to limit the power of royalty to reward favored individuals with monopolies has become with the passage of time a system that serves primarily to encourage failing monopolists to inhibit competition by blocking innovation.

After reviewing the economic literature, Boldrin and Levine find almost no evidence that patents serve innovation, and conclude that "the patent system taken as a whole does not play an important role in spurring innovation." They acknowledge that in theory it is possible to create a patent system that would foster innovation. They also recognize that there are various possible ways of improving the existing patent system, including "properly interpreting obviousness, requiring genuine disclosure of working methods and an independent invention defense against patent infringement..." But, they ask, "why use a band-aid to staunch a major wound?"

They propose phasing out patents by shortening their duration and otherwise limiting their force. Some of their argument is phrased in the rather dry language of economics, but not this point: "If a well-designed patent system would serve the intended purpose, why recommend abolishing it? Why not, instead, reform it?... Our argument is that it cannot be otherwise: the 'optimal' patent system that a benevolent dictator would design and implement is not of this world and it is pointless to advocate it as, by doing so, one only offers an intellectual fig-leaf to the patent system we actually have, which is horribly broken. It is fine to recommend reform, but, if politics make it impossible to accomplish that reform, if they make it inevitable that we have a patent system it will fail, then abolition—preferably by constitutional means as was the case in Switzerland and the Netherlands prior to the late 19th century—is the proper solution..."

Is this just crazy talk? The inherent social and economic forces that Boldrin and Levine say are bound to cause the system to fail are also bound to defend the system fiercely. But it is certainly provocative.

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40 Comments

All patents should be abolished. All such systems are unstable. They can't be "fixed". They quickly go to one extreme or the other. They either become so ineffectual that they shouldn't exist or they become so strong that they freeze out any other endeavour. There is no happy medium. Just get rid of them.

Musicians have not make any money from record companies for decades. And, since they have to sell all their rights, every time they play their own music in a concert, they have to pay the record company royalties. Now, publishers are buying up all the rights from authors. Guess what comes next.

Musicians don't get much when the record company finances their production. When you produce your own (using open source software and less expensive hardware - a good condenser mic is $500, but other stuff is pretty cheap), you can get 50% of gross: http://magnatune.com

And without Copyright protection, you'll sell a few songs and then nobody will buy your music anymore. Just because publishers buy up rights, doesn't mean musicians and other content producers should allow everyone else to trade in their work.

That's a decision for authors to make. Without copyright, you couldn't have open source licensing at all. You would be forcing everyone to publish their work in the public domain or closed source. Artists (including musicians) do not have to sell their rights, they choose to do so. There are those that don't, and copyright protects their investment.

Agreed - but it won't happen. Patents benefit corporations with tons of money to make sure that the system does not change, or or changes in their favor. Look at the repeated extensions of the life of copyright to the point of absurdity.

Curiously patents and copyright are a government created monopoly and enforced government market intervention, that you never see "free market" extremists, "non-interventionists" argue against. There's principles, and then there's money, and money always wins.

My solution (not that it will ever happen) would be to charge corporations (but not natural persons) a fee for the service that government provides. Not just a fee for processing the patent application, but on-going fee for the government provided monopoly. It would be a very high fee that reflects the value of the monopoly. The fee would be waived if the patent/copyright was made public domain. Thus patent trolling would become enormously risky, and patent hoarding would be enormously expensive. Money speaks.

I subscribe to the Federal Reserve Bank of St. Louis publication so I read "The Case Against Patents" when it was published. I agree with Michele Boldrin and David K. Levine on their reasons to abolish software patents. I am neutral on their reasons to abolish all other types of patents because I don't really know enough to evaluate their argument on the other types of patents.

I don't think that Boldrin and Levine's economic reasoning would make much of an impression in a court of law. I submitted an Amicus Curiae to the United States Court of Appeals For The Federal Circuit last Thursday and in that brief I only mentioned two of their reasons in passing when I explained what my interest was in CLS Bank International v. Alice Corporation PTY. LTD.

I think that some form of copyright protection could be viable, in a sense comparing a software program to a novel. Thus, one could not plagiarize someone else's program, yet you could still be free to use someone else's ideas for your own program.
Look at auto makers. They may come up with some new feature for a model of a car, and wholly expect others to copy it.
What is absolutely abominable is the ability to patents ideas for software, never having created any actual working code.

Actually, an idea belongs to the person not the commons. What patents do is provide an incentive, a period of monopoly control of his or her idea, for full disclosure. Software should be covered by copyright and not patent law.

It depends on what you mean by ideas. Inventions belong to the inventor see the Constitution, writing belong to the author see the Constitution. The basis of all property law is creation. The creator is the original owner of all creations.

Sorry, but you're wrong. The law states explicitly, via patent and copyright, that the idea belongs to the person having the idea. That people can sue in a court of law to protect their rights of ownership proves that point.

Yes ideas belong to the person that has the idea. (As does inventions, writing, arts, software etc).

BUT if that person wants to engage in trade, then he's not the only party. The other party has rights too. The other party brings value. The other party is entitled not to be extorted.

In an idealised free market, competition protects the other party. In monopolies - which is what patents and copyright are - there is nothing to protect the other party.

You have a sick child who will die today if you don't have the drug that I have a monopoly on. My price for the drug? Your house, all your money, and everything you will earn for the rest of your life. Deal? No? child dies. OK?

In the simplest of terms. Remember when you were a kid, and you used to fight over Tonka Trucks and Barbie dolls? Our Moms used to tell us to not be selfish, and to share our toys. Back then, we were fighting over physical objects.

Now we've grown up and instead of fighting over physical objects, we're fighting over intellectual ideas, or virtual objects. These virtual objects cannot be physically held in our hands.

The sad part is, virtual objects can easily be copied and reproduced "shared" at little to no cost. The same cannot be said for physical objects.

Yet here we are, all grown up and still fighting over "intellectual ideas", just like we were some years ago with our Tonka Trucks. Only this time, instead of our Moms being the referee, it's lawyers.

I guess that shows we still have a lot of growing up to do, before we can actually call ourselves a mature species. To me the human race still looks like a bunch of selfish children fighting amongst themselves. The only thing that's changed is the toys we're fighting over.

Every invention should have a shelf life of between 5 - 10 years with no ability to renew in anyway shape or form. Anything and I mean anything after set number of years becomes public domain,, this include inventions, technology, art, music, whatever... nothing should be locked down indefinately. We all stand on the shoulders of giants.

Levine and Boldrin are incorrect about patents not being property rights. Patents are not a monopoly and anyone who suggests that they are either does not understand the rights obtained with a patent or is pushing a political agenda. Patents only give the holder the right to exclude, they do not give the holder the right to make something, let alone a right to a market. A monopoly is a right to a market. For more information see http://hallingblog.com/2009/05/31/the-myth-that-patents-are-a-monopoly/

For your comment to be enlightening, you need to explain the (apparently) special legal definition of "property" you have in mind (you did explain "monopoly"). Then recognize, that while lawyers have these special definitions for the same reasons programmers do, it isn't what the authors meant by "property".

That said, I do wish the phrase "intellectual property" would disappear from layman discussions. Even laymen should be able to see that patents, copyrights, and trademarks are all different programs with different problems.

I did not use a special definition of property - I used the term in the way it is used in the law and by the founders of the US.

Monopoly comes from the statute of monopolies. My definition is consistent with that definition and the definition of a state created monopoly. Some economist have broadened the term to encompass all property rights. This is clearly non-sense and is done for political purposes.

The holder of a patent does indeed have a monopoly with regards to that covered in his or her patent as patents provide exclusive control of that covered by the patent for a specific period of time. The word "monopoly" is not limited to access to markets.

Nonsense. All property is about giving the right to exclude others. Property is not a monopoly. Patents allow you to exclude others, but does not mean that you are not excluded by other patents. You do not understand patent law or property rights.

Alright, know-it-all, the word monopoly is defined as "exclusive control" and is extended in the legal system as applying to control over markets, resources, etc. I'm using the term to indicate "exclusive control". What's interesting is that you are intermingling these definitions as you're the one who stated "If you do not have the right to sell something, you cannot have a monopoly by any meaningful definition of a monopoly". You obviously aren't very careful in your use of words, so don't even try to be technical at this point.

Here's an objective fact: you have an opinion about the law. Most lawyers do and they get argued in court. Unlike science, in which empirical data exists, no such thing exists in law, only interpretations. You're entitled to your interpretation but that is all it is, an interpretation. Now I don't subscribe to the Austrian school of economics, but I agree with Stephan Kinsella's argument.

But the patent holder does have the exclusive right to sell something. According to the law:

CHAPTER 26 — OWNERSHIP ANDASSIGNMENT
35 U.S.C. 261
Subject to the provisions of this title, patents shall have the attributes of personal property. Applications for patent, patents, or any interest therein,shall be assignable in law by an instrument in writing.The applicant, patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States."

It is different than other "property" as the government grants exclusive privilege, allowing the owner to act monopolistically as no one is allowed to compete by default. Of course, people can choose to not license the patent, but there is no competition between the patent owner and others, which is your market-based definition of monopoly.

Not so. I may have exclusive property rights to my chair but a person is not constrained to deal with me with regards to procuring a chair. The market is open, with many sources of chairs. However, the property rights granted by a patent is a monopoly as the market is forced to deal with the person/entity granted the patent or do without it. That is the definition of monopoly.

Patents are monopoly that is provable by the fact that patents provide exclusive rights . Without patents, N people come up with a "solution" and must compete with one another to supply that "solution" to customers. With patents, only one person/entity is awarded rights to the "solution". Thus, there is no competition and the market is forced to either deal with the person/entity holding exclusive rights or do without. That is monopoly by definition.

Once again you prove your ignorance. How many patents do you think there are on microprocessors? Can you buy microprocessors Intel, AMD, Motorola, etc? How many patents are there on cars? Can you buy cars from a variety of manufactures?

You do not understand patent law and are speaking from emotion not facts. Patents do not give you the right to do anything. They do give you the right to exclude others from making, selling, importing a device incorporating you invention. You property rights in you chair keep me from selling, from incorporating it into my car, etc. In addition, your property rights in your chair allow you to use you chair. My patent on a CRC encoding scheme does not necessarily allow me to use my invention

Once again, you prove your ignorance. The patent awards exclusive rights to a specific "solution". So, using your example, while there may be a number of processors, only those that license the solution can provide its benefits. CPU manufacturers are forced to deal with a monopoly or not. The patent holder has monopolistic powers with regards to that contained in the patent.

You do not know the definition of a monopoly - you have failed to distinguish if from property rights. You do not know the history monopolies - exclusive right are common to all property right.

Wikipedia defintion In economics, a government-granted monopoly (also called a "de jure monopoly") is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation, or other mechanisms of government enforcement.

SOLE PROVIDER. Patent holders are not the sole provider, they may not even be allowed to provide (build and sell their invention).

I suggest that you look up the definition. A monopoly is exclusivity, which is what a patent provides. A patent holder is the sole provider of whatever that patent covers, however while you may have exclusive rights to your property, such as your chair, others can supply chairs, so there's no exclusivity while there is with regards to what a patent covers. You're flailing.

Many thanks for pointing me in the direction of this important paper. You have summarized the contents admirably, though I would still recommend reading the source, which contains several additional points. In particular I noted that while Boldrin and Levine found no evidence that patents serve the desired purpose of encouraging innovation, they also found no correlation between strengthening patent laws and increased production. The net result has a larger negative impact on social welfare, which supposedly was the beneficiary of patent laws in the first place. The real beneficiaries are only those defending their monopolies, patent lawyers and the "dark" marketeers known as patent trolls.

I was also surprised that the two professors are not alone in their conclusions, as others including Gallini, Jaffe and to a certain extent Lerner agree on the lack of discernible evidence.

Facing an imperative for increased and faster innovation, increased and improved productivity it seems incongruous to try to strengthen the patent system. At the same time it seems almost self defeating to extend US IP influence in trade agreements such as SOPA, ACTA, PIPA and TPP, especially if we encourage other countries to reciprocate deterrents to our own innovation and productivity.

As Boldrin and Levine noted the advocates of strong patent laws tend to come from old and stagnant industries and firms as they seek to protect their once-but-no-longer-innovative IP.

It will be hard to abolish the patent laws, but after reading their arguments there seems little alternative. Yes we can make the adjustments they recommend but if the overall edifice remains the same our competitive edge will be forever dulled.

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Rob Tiller is vice president and assistant general counsel for Red Hat, where he manages patent, trademark, and copyright matters. He is a frequent speaker and writer on open source legal issues. Before coming to Red Hat, he was a partner with the law firm of Helms, Mulliss & Wicker, PLLC, where he specialized in commercial and IP litigation. He is a graduate of the University of Virginia School of Law, and a former clerk for Justice Antonin Scalia of the U.S. Supreme Court, and Judge

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